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Jet Airways crisis: Taking away international flying rights may prove to be death-knell for the airline

Ajay Awtaney

A couple of days ago, Jet Airways informed the exchanges of another 15 Jet Airways aircraft being grounded on account of the lessors not receiving any payments from the airline. There was a lot of commotion about what would be the final operational count of aircraft for the airline at the moment.

The National Civil Aviation Policy 2016 states that "all airlines can commence international operations provided that they deploy 20 aircraft or 20 percent of total capacity (in term of average number of seats on all departures put together), whichever is higher for domestic operations." However, the policy foresees nothing and does not talk about any situation where the State will withdraw the permission to fly abroad.

In the case of Jet Airways, there are about 28 aircraft flying now, as per the latest data that LiveFromALounge.com tracked, including nine 737 aircraft and 7 ATR aircraft. The rest of the aircraft operating are all wide-bodies, primarily used to fly abroad. The Directorate General of Civil Aviation (DGCA's statement that they need to examine the permission for Jet Airways to fly international at the moment. Jet Airways is now the smallest scheduled airline operating pan-India.

When the last Board meeting of Jet Airways was held on 25 March, 2019, the airline effectively made a barter, where in exchange for the Chairman stepping down, it was to receive an emergency funding of Rs 1,500 crore from the banks, who would effectively become a 50.5 percent plus owner of the airline when the restructuring goes through. The money never came. Jet Airways had to ground another 15 aircraft, and bought some time with the pilots who were threatening to go on a strike with effect from 1 April for non-payment of dues.

And while the law will take its course, there are some good reasons from a passenger perspective to look at why the international flights of Jet Airways are the last bastion, which should be taken into consideration before the government takes a decision.

A look at the DGCA data for the quarter October-December 2018 shows that Jet Airways had roughly about a 12 percent share of India's international traffic, including passengers that flew out of India and those that flew into India.

Jet Airways' eight Boeing 777 aircraft and their Airbus 330 aircraft, most of which they own, have a large part to play in India's international foray, and have been built over the years, not overnight. Jet Airways flies to London, Paris and Amsterdam from various points in India. With the upcoming vacations, the plans of a lot of Indian travelers would go for a toss if these routes were withdrawn from service at a short notice. The chaos that one witnessed in the domestic airline scenario would be repeated again.

One must not forget the Commercial Pact that Jet Airways has with KLM/Air France, and their tie-up with Delta, which allows for Jet Airways to bring in passengers into Europe at London, Amsterdam or Paris, and KLM/Air France/Delta/Virgin Atlantic flying them over to many destinations in the USA.

Effectively, after Air India's direct flights from India to the USA, Jet Airways is the only other carrier which can fly to long-haul destinations at the moment, and provides an Indian option to the passengers. So, there are no other alternatives if Jet Airways' international operations are asked to close down right now.

Another big reason to take some time to make this decision is to see the preparedness of other operators to step into this situation. While it is easier to mount flights inside India when one carrier withdraws service since there is only one regulator to please, international services are a whole different ball game. An airline needs to have the right equipment to fly those segments, the right crew trained to provide safety and service on board those aircraft, the slots at international airports and the permission of the other regulator to fly. And all of that is before you start international operations to a new station. There needs to be the marketing of those routes and then over years, people start flying the route.

Jet Airways has the long-haul network established right now, and if it is taken away from them, it would set us back by many years since another carrier won't be able to immediately step in. And if you closely examine the order books of Indian carriers, the only other Indian carrier which would be able to step in would be Vistara, which again has their 787 aircraft on order, but won't receive them before early next year. Air India, India's national carrier, also does not have spare planes to launch flights to step in for Jet Airways.

Another thing to note is that for the moment the 777s of Jet Airways are owned by the airline and they have 346 seats per aircraft which is double the capacity or even more than that of a 737 aircraft. These aircraft are designed for long-haul flights. If the regulator asks Jet Airways to substitute their domestic flights which were to be operated by 737s and operate them with 777 aircraft day in day out, that would be a huge mistake since on a domestic route network passengers don't want bigger planes but more frequencies.

The international operations of Jet Airways have been their primary revenue earner for a very long time. A look at Jet Airways' 9-month published financials ending December 2018 would show that Jet Airways receives 55 percent of their revenue from flying abroad. These are routes that are not price-sensitive and hence the airline does not have to keep downing prices every day to fill up the planes, unlike the domestic situation. The share would have definitely gone down in the last quarter since the airline also stopped flying to a lot of international destinations such as Dubai, Abu Dhabi, Hong Kong and so on temporarily due to their situation. But if the government makes it permanent, there would be no coming back from this.

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The bilateral agreements which govern flying rights to other countries are already full to a large extent, and they are renegotiated only when both countries fill up about 80 percent of the seats. In this case, if Jet Airways is taken out of the picture, while the overseas carriers have exhausted their rights, the Indian bilateral will not be filled up and hence no renegotiation would happen. So, it is not like the international carriers would be handed over more traffic rights and they can fly more from India. But yes, we would be giving them away market share on a platter. After all, the DGCA's ability to request airlines to not raise prices does not work very well on international carriers who operate as per a demand and supply situation. So even as the government frets at international carriers such as Emirates taking a lion's share from India, they would be handing it over on a platter if they allow Jet to fail on these routes.

And last but not the least, Jet Airways has been a showcase of Indian hospitality abroad. One can find fault in the way the airline was managed, but as a brand, Jet Airways is known abroad to be one of the finest Indian carriers and has a reputation which is still keeping their planes full.

(The writer is a business travel and aviation journalist based in Mumbai, and the founder of the Indian frequent-traveller website Live From A Lounge, www.livefromalounge.com. He tweets at @LiveFromALounge)

Also See: Naresh Goyal writes emotional mail to Jet Airways staff: 'It's not the end of journey, but start of a brand new chapter'

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